Uranium stocks have made headlines this week, with global tailwinds providing long-term upside for producers.
In particular, Paladin Energy Ltd (ASX: PDN) has drawn significant attention from brokers.
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Why the increased attention for uranium stocks?
As reported by my colleague Mark Verhoeven earlier this week, the spot price of uranium is hovering near US$90 a pound.
However, more importantly, the long-term contract price is US$97 a pound, its highest level in more than eighteen years.
This is being driven by expectations of a gap between supply and demand.
On the supply side, some of the world's biggest uranium producers are facing production challenges and delays, making it harder to increase supply.
At the same time, demand for uranium is expected to rise significantly as more countries build and rely on nuclear power.
Utilities companies are already locking in uranium supplies years in advance because they want to make sure they have enough fuel for their reactors.
If demand keeps growing while supply remains tight, uranium prices could stay strong or rise, which could benefit companies that produce or develop uranium projects.
This is why investors are paying more attention to ASX-listed uranium stocks.
Why Paladin is a winner
This is positive for Paladin Energy because it is already producing uranium through its Langer Heinrich mine in Namibia.
If global uranium demand continues to rise while supply remains tight, uranium prices could increase, allowing the uranium stock to potentially generate more revenue and profits.
In simple terms, it benefits if uranium becomes more valuable because it is already a producer and can sell into that stronger market.
Brokers tipping big upside
Thanks to these emerging tailwinds, brokers are tipping healthy gains over the next 12 months for this ASX uranium stock.
It closed trading yesterday at $11.73 per share.
The team at Canaccord Genuity has a buy call on Paladin Energy shares with a $15.80 target.
This indicates a 34% upside from current levels.
Elsewhere, Morgans has an accumulate rating and $13.30 price target, indicating 13% upside.
The current Patterson Lake South (PLS) resource may only represent part of the story – The mine plan supports ~9Mlbpa over nine years, yet mineralisation remains open at depth and along strike, drilling density declines materially below 350m. We expect the resource and mine life to increase materially in time. Simply simple – PLS is one of the highest-grade undeveloped uranium projects globally, but its development plan is surprisingly conventional, with a TBM decline, proven mining methods, a standard Athabasca processing flowsheet and uncomplicated tailings storage reducing technical risk.
